CI revises outlook on Credit Libanais to â€˜Stableâ€™ from â€˜Negativeâ€™
Capital Intelligence Ratings (CI) has revised the Outlook on the Long-Term Foreign Currency Ratings (FCR) of Credit Libanais (CL) from ‘Negative’ to ‘Stable’. At the same time, the Long- and Short-Term FCRs have both been affirmed at ‘B’ and remain constrained by the Sovereign Ratings.
The rating action follows the revision of the Outlook on Lebanon’s Sovereign Long-Term FCR of ‘B’ to ‘Stable’ from ‘Negative’ on 7 April 2017.
The ratings reflect: a) the stabilisation of domestic political risk factors following the election of a president and the subsequent formation of a new government following two years of political standoff; b) easing tensions with Saudi Arabia and other key members of the GCC, which is likely to boost key sectors of the Lebanese economy, namely tourism and real estate; c) improvements in the policymaking environment, with parliament recently passing the annual draft budget law for the first time in a decade; d) the stable buffer of foreign exchange reserves, which provide adequate coverage of the country's external debt.
CL’s FCRs are highly correlated with the sovereign’s creditworthiness. Any improvement or deterioration in Lebanon’s creditworthiness would have a corresponding effect on the Bank’s FCRs. The Bank’s Support Rating is affirmed at ‘3’, which implies a high likelihood of support given Banque du Liban’s record of assisting banks.
CI also announced that the Financial Strength Rating (FSR) of CL is affirmed at ‘BB+’, with the Outlook also revised to ‘Stable’ from ‘Negative’, to reflect the improved outlook on the sovereign risk profile. The FSR of CL and all other Lebanese banks is currently under annual review.